Saving enough money for a down payment on a home is a hurdle that most home buyers face early on. Lenders require down payments as a demonstration of your financial responsibility. Having a significant amount of money invested in the house also reduces your risk as a borrower.
In ideal circumstances, lenders prefer to see buyers make a down payment that is 20% of the house’s value. With a down payment of this size, most lenders will also waive the requirement for private mortgage insurance.
Coming up with this amount of money can be difficult for many buyers. Down payment assistance programs are an option that can lower the amount that lenders require or add funding to help cover costs. Knowing about the types of assistance that are available helps you make the best financial decisions on a home purchase.
Check Out Government-Sponsored Loans
The U.S. government backs two main types of loans, and this allows lenders to be more flexible with their requirement. VA and USDA loans offer the option of being able to opt out of making a down payment. The money that a buyer saves from this option can then be used towards other costs that are involved with buying a home.
These loans have specific requirements such as having military experience or falling within certain income limits. Buyers must often submit proof of them meeting the requirements. Veterans and active service members may need to provide a certificate of eligibility, but the extra effort is worth it to avoid having to make a down payment.
Look Into Specialized Assistance Options
Special loans are available for people who fall within specific categories. The Doctor Loan Program is one example of specialized down payment assistance programs. These programs aim to help people within special career fields buy a home. They typically offer loans with down payments ranging from zero to 10%.
Explore State and Regional Programs
The Arizona Industrial Development Authority administers a special home buyer down payment assistance program. This program provides Home Plus loans with down payment assistance that goes up to 5%. The funds can be used for either a down payment on the house or the closing costs during the sale.
There are specific criteria that must be met to be eligible for the program. For instance, the home buyer must fall below the maximum income limits and meet the credit score and debt to income ratio requirements. The process for applying for this program begins with finding a lender that will walk you through each step.
Most first-time homebuyers will find that they can qualify for some type of down payment assistance. Figuring out which one works best for you involves looking at all of the benefits offered by each type of program.
We are here to help you get the help you need to buy a new home. Give us a call and let’s explore all the possibilities.